Tuesday, April 02, 2013

The WSJ Notices What I Noticed About Pipelines Vs. Trains

I waxed a tad conspiratorial recently over the non-developments concerning the Keystone XL pipeline.  Well, today, in no less a prominent place than the lead editorial in the WSJ, Gigot & Co. sound a little conspiratorial themselves on the matter.
What's the difference between an oil spill from a pipeline and an oil spill from a train? Answer: A lesson in political opportunism.
The media have played up Friday's discovery of an oil leak in an old Exxon Mobil pipeline near Mayflower, Arkansas. It isn't clear how much oil escaped from the 850-mile Pegasus pipeline, but Exxon says it responded with teams and equipment able to handle as much as 10,000 barrels and that by early Saturday it had stopped the flow and begun cleanup.  

The real reason for the headlines is that Pegasus was delivering heavy crude from the Canadian oil sands to Texas. This is similar to the oil the proposed Keystone XL pipeline would deliver from Canada to the Gulf Coast, and the anti-Keystone capos are using the Exxon spill to scare up political opposition to the new pipeline.
All of this is in marked contrast to the non-reaction last week when a Canadian Pacific Railway  train carrying crude to Chicago derailed in western Minnesota, spilling about 15,000 gallons. Much of the press also ignored the train accident, though the spill was certainly serious and also took place near a town.
The train wreck illustrates one economic reality of the U.S. shale drilling boom, which is that energy companies have turned to shipping by rail as pipeline capacity has been filled. The volume of oil transported by U.S. rail has surged to 233,811 carloads in 2012 from 9,500 as recently as 2008. This means boom times for freight rail lines, including Burlington Northern Santa Fe, which is owned by Warren Buffett and Berkshire Hathaway.
We are living the crazy times here in early 21st century America, so this is nothing.


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